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Steinhoff tumbles to new low on property value fears

The retail group says it is still considering the €1.1bn write-down on its €2.2bn portfolio of European properties recommended by independent valuer CBRE

04 April 2018 - 11:59
Ann Crotty

Picture: DAVID HARRISON

Steinhoff’s share price slumped to a record low of R3.01 on Wednesday after news of a possible €1.1bn write-down on its European property portfolio.

On Tuesday, the retail group said it was still considering the €1.1bn write-down on its €2.2bn portfolio of European properties recommended by independent valuer CBRE.

But the market appears to have assumed the worst and now fears that write-offs could extend to the group’s total non-South African property portfolio. Steinhoff is dual listed in Johannesburg and Frankfurt.

Meanwhile, Rand Merchant Bank Holdings (RMBH) CEO Herman Bosman said he was confident that the eastern European property assets recently acquired from Steinhoff would not be affected by the Steinhoff write-down.

Steinhoff did not respond to requests for clarity on the total value of the group’s property portfolio or why only €2.2bn of it was subject to scrutiny by independent valuers. The properties that were revalued were held by Hemisphere, a wholly owned subsidiary of Steinhoff.

Tuesday’s stock exchange statement said that CBRE had been engaged with the investigation into the validity and recoverability of certain non-South African assets.

The investigation was undertaken in a bid to finalise the audit of the financial statements for 2017.

The portfolio probed comprises 140 properties, including stores, warehouses, offices, production sites and vacant land across Austria, Germany, the Netherlands, Switzerland, the UK and in eastern Europe. The most recent publicly available Steinhoff balance sheet to end-March 2017 reveals property, plant and equipment worth €5.4bn. This is the second most valuable asset on the balance sheet after goodwill and intangible assets of €17.7bn.

As with all the information produced by Steinhoff over the past four years, the March 2017 balance sheet carries a warning that it “can no longer be relied upon”. The quarterly update for the three months to December 31 2017, released in February 2018, shows Steinhoff had 12,300 retail outlets, or about 9.1-million square metres.

In December 2017, Steinhoff said it was investigating the “validity and recoverability” of certain non-South African assets worth about €6bn. This saw the share price plunge from R56 to R10, knocking tens of billions of rand from the group’s market value.

The latest news about Steinhoff’s property write-down raised contagion concerns among shareholders in RMBH, which acquired 44% of Atterbury Europe from Steinhoff in January. Atterbury Europe has developments in Cyprus, Serbia and Romania.

Bosman said although Steinhoff had been a shareholder in Atterbury Europe until December 2017, the developments had no exposure to Steinhoff.

“The portfolio was established as a separate portfolio and as a result we are confident that AE’s [Atterbury Europe’s] valuation will not be affected by the write-downs at Steinhoff,” Bosman said.

The portfolio had recently been valued by independent valuers, he said.